Net profit is subject to tax.

June --

I have a question. I teach Metal Clay classes (making fine silver jewelry from silver in clay form). I charge $85 fee which includes $35 for supplies. What portion of this do I have to pay tax on as income. I am assuming I would just claim $50 as income but I wanted to be sure.

Edith


Edith --

An indie claims all income she receives. That's gross income.

Then she deducts all expenses.

What remains is net income or profit or loss. It is that amount on which you are subject to tax.

Here are more posts on income .

-- June

Good Records = More Deductions

Hi June,

I'm a jewelry artist -- three years.

I've decided to take the plunge and start applying to do outdoor art festivals. I have to buy a camper shell for my truck to haul all the required paraphernalia (protect from weather and thieves!). Since the truck is also for personal use, I can't figure out if there's any way to deduct/depreciate part of the cost of the topper? It's not feasible to take it off when not being used for shows. Is there anything I can do? These things aren't cheap!

thanks,
zee
Tallahassee, FL

p.s. my New Year resolution is to reread your book and keep better records!!!



Hi zee,

I'm going to start with your PS. The better your records the more you can deduct. I should put a"generally" into that statement, however, I have found it to always be the case.

If you keep good records then you look more like a business to the IRS and the IRS is more likely to accept an untypical deduction.

So, with not so good records, I would deduct the cost of the shell based on the portion of business use of the truck. The IRS could not argue with that.

With really good records -- which would include photos of the truck in the rain at shows -- I would use the entire cost as a business deduction. And even with that, I am not sure the IRS would accept it.

Of course, if you removed the shell when using the truck for personal use you cold deduct the entire cost.

You might want to take a look at my new petite publication The Confident Indie: Five Easy Steps -- easy recordkeeping as well as my worksheets for your 2010 tax return.

I wish you success at the festivals!
June

Husband & Wife Business

June,

I am a 1099 web developer. My wife makes jewelry which she sells in her spare time. Can we roll both of these businesses into one entity (a DBA maybe?) to be able to deduct her expenses for tools and supplies.

Thanks!
Jason


Hi Jason,

This is how to do it: One of you has a sole proprietorship business that legitimately combines all services and products that you both offer. One spouse becomes the employee of the spouse with the business.

There are many benefits to this type arrangement, including medical and pension. There'll be a posting soon explaining all the benefits.